GameStop Q3 earnings fall 10%

Same-store sales down from year-earlier Halo 3 launch

By Danny King -- Video Business, 11/20/2008

NOV. 20 | GameStop's fiscal third-quarter earnings fell 10% as same-store sales declined compared to the record year-earlier launch of Halo 3 and lower than expected sales overseas. The company also cut its fiscal fourth-quarter forecast for earnings and same-store sales.

Net income for the third quarter ended Nov. 1 was $46.7 million, or 28¢ a share, down from $52 million, or 31¢, a year earlier, as sales rose 5.2% to $1.7 billion, the company said in a statement today. Same-store sales declined 1.8%. GameStop was expected to earn 37¢ a share on $1.82 billion in sales, the average estimate in a Thomson Financial survey.

GameStop is facing more competition from both traditional and online retailers trying to capitalize on a videogames market that through September surged 18% from a year earlier as DVD sales have flattened and music sales have dropped. Last week, Microsoft launched a separate Web page dedicated largely to sales of its Xbox 360 console and videogame titles.

"We're both cautious and appropriately aggressive," GameStop executive chairman Richard Fontaine said on a conference call with analysts this morning. Fontaine characterized economic conditions for retailers as "almost a headwind with flying nails."

GameStop today said fiscal fourth-quarter earnings would be as much as $1.34 a share, down from its August forecast of as much as $1.40. He said same-store sales will rise as much as 5%, down from its August estimate of as much as 10%.

The company also completed its acquisition of the 332-store French videogames chain Micromania.

In late August, chief operating officer Daniel DeMatteo replaced Fontaine, the longtime CEO, after the company reported fiscal second-quarter results that some analysts interpreted as reflecting a loss in market share.

GameStop said today that its program allowing customers to trade games boosted the company's market share last month.